Edison International (EIX) — Q2 2025 Earnings Call Transcript

Thank you, Denise, and welcome, everyone. Our speakers today are President and Chief Executive Officer, Pedro Pizarro; and Executive Vice President and Chief Financial Officer, Maria Rigatti. Also on the call are other members of the management team. Materials supporting today's call are available at www.edisoninvestor.com. These include our Form 10-Q, prepared remarks from Pedro and Maria and the teleconference presentation. Tomorrow, we will distribute our regular business update presentation. During this call, we will make forward-looking statements about the outlook for Edison International and its subsidiaries. Actual results could differ materially from current expectations. Important factors that could cause different results are set forth in our SEC filings. Please read these carefully. The presentation includes certain outlook assumptions as well as reconciliation of non-GAAP measures to the nearest GAAP measure. During the question-and-answer session, please limit yourself to one question and one follow-up. I will now turn the call over to Pedro.

Thanks a lot, Sam, and good afternoon, everyone. Today, I will address three key topics for our investors: an update on the Eaton Fire, our confidence that California's legislature will support healthy investor-owned utilities, and an update on regulatory decisions and future actions that position SCE well to deliver on its commitments for customers and other stakeholders. Let me start with a brief comment on earnings. Today, Edison International reported second quarter core earnings per share of $0.97 compared to $1.23 a year ago. However, as I have mentioned before, this year-over-year comparison is not particularly meaningful because SCE has not received a final decision in its 2025 general rate case. Nonetheless, we remain confident in our ability to meet our 2025 EPS guidance and deliver a 5% to 7% core EPS compound annual growth rate through 2028. I will touch on the GRC proposed decision in a few minutes, and Maria will discuss our financial performance in her remarks. On the Eaton Fire, the investigations by SCE and the LA County Fire Department remain ongoing. There are no additional disclosures on the ignition or estimated cost at this point. To recap, SCE is not aware of evidence pointing to another possible source of ignition. Absent additional evidence, we believe that SCE equipment could have been associated with the ignition. In addition, numerous lawsuits have already been brought against SCE. If it is determined that SCE's transmission equipment was associated with the ignition of the Eaton Fire, based on the information we have reviewed thus far, we remain confident that SCE would make a good faith showing that its contract with respect to its transmission facilities in the Eaton Canyon area was consistent with the actions of a reasonable utility. As we know from prior wildfire events, engaging with and helping the community is critical. That's why we announced last week the wildfire recovery compensation program, which SCE will launch this fall. The program will provide direct payments to eligible individuals and businesses. Resolving claims quickly allows the community to focus on recovery and minimizes the overall cost by mitigating the impacts of interest expense and inflation. This will also help utilize the wildfire fund efficiently and have more of the cash support impacted community members instead of being spent on higher legal costs. On the legislative front, we are encouraged by the continuing discussions with the Governor's office and legislators to enhance California's industry-leading AB 1054 regulatory framework. Given the economy-wide consequences of inaction, we believe policymakers will strengthen California's wildfire framework during the current legislative session. The issue of wildfires is not just a utility regulation issue. The full solution must include broader actions across multiple sectors and could be addressed during next year's legislative session. Separately, a number of affordability bills are being discussed. Our track record on cost management, which I will discuss in a few minutes, shows our commitment to affordability. There are good steps the legislature can consider to improve affordability, like rightsizing public purpose programs and net energy metering, and streamlining siting and permitting. However, provisions like securitizing capital may be well-intentioned, but in fact, would actually raise customer costs by deteriorating credit quality. We will continue to engage with legislators to help them make decisions that are grounded in the facts. Moving to the regulatory front, SCE continues to build on its progress across multiple proceedings, further derisking our financial outlook. Maria will expand on several of those proceedings in her remarks, but let me touch on the proposed decision in SCE's 2025 DRC issued by the administrative law judge on Monday. Page 3 provides the summary. The proposed decision overall generally aligns with our rate case rate base forecast. We share the ALJ's view that critical investments are needed to maintain a safe, reliable, and increasingly clean electric grid. On the other hand, key areas of the proposed decision require improvement, so SCE will seek revisions. The proposed decision would authorize base revenue of $9.8 billion or 93% of SCE's requested revenue requirement. It also supports significant capital investments in wildfire mitigation, grid modernization, and infrastructure replacement, while incorporating affordability considerations for customers. The reductions from SCE's request primarily relate to scope, pacing, or cost, not to the underlying need or effectiveness of the programs. Most notably, the proposed decision finds that covered conductor has been a highly effective wildfire mitigation strategy and that no party recommended a reduction to SCE's request. It also notes that no party disputed that targeted undergrounding is an effective tool for SCE, although it would authorize fewer miles than SCE proposed. The proposed decision affirms the reasonableness of the utility's base load growth forecast and recognizes the importance of SCE's planning methodology, which integrates statewide forecasts with local system knowledge. This supports our long-term strategy to ensure the grid is ready for California's electrified future. However, there are some areas where the proposed decision is not fully aligned with customer needs and will be part of the utility's opening comments. Maria will say more in her remarks. The January wildfires underscore the importance of mitigation plans and the need for continuous and evolving tools to maintain infrastructure resiliency. SCE submitted its 2026 through 2028 wildfire mitigation plan in May, outlining a comprehensive strategy to address both immediate and long-term wildfire risks with new and innovative solutions. The plan reflects the utility's commitment to public safety, risk reduction, and affordability and builds on foundational mitigations such as covered conductor targeted undergrounding and enhanced vegetation management. Over the 2026 to 2028 period, SCE anticipates investing $6.2 billion. The plan also supports the continued use of aerial firefighting assets, including the world’s largest heli-tankers with nighttime capabilities and aims to inspect approximately 1 million trees annually. Public Safety Power Shutoffs remain a critical tool in wildfire prevention. This year's PSPS updates include revised criteria and wind speed thresholds, expanded circuit coverage, and broader boundaries around high fire risk areas. As always, SCE remains focused on customer support and outreach to enhance safety and reduce the impact of PSPS events. Additional details can be found on Page 4. As you will recall, a year ago, we shared our projection that even with 100% of SCE's GRC request, the utility expects its system average rate to grow on average at an inflation-like level through 2028. Based on where things stand today, that is still the expectation, which is further enabled by SCE's enduring focus on operational excellence and efficiently managing costs for customers. SCE has a more than 15-year track record with the lowest system average rate among California's major industrial-owned utilities, thanks to successfully executing on its operational excellence initiatives and taking proactive measures to address customer affordability. Technology is a major driver of better affordability, safety, reliability, and resiliency. For example, last month, EEI once again selected EIX and SCE as the winner of their prestigious Edison Award, recognizing distinguished leadership, innovation, and contribution to the advancement of the electric industry for the benefit of all. Our winning project, SCE's Advanced Waveform Anomaly Recognition Engine, or AWARE for short, uses real-time grid sensor data, AI, and machine learning to proactively predict potential system issues and pinpoint where failures take place within the SCE service territory. Customers benefit from higher safety and reliability, faster restoration times, and higher affordability through optimized crew time. I am proud of our team for their steadfast commitment to operational excellence and for creating this AI-driven solution to help make the grid safer and more resilient for our communities. I will conclude my remarks by reiterating the key messages. First, SCE is continuing with its investigation on the origin and cost of the Eaton Fire, and there are no new disclosures about the ignition or cost estimate at this time. When we have additional relevant information, we will share it with you and, importantly, we'll continue our transparency with our community. Second, we are confident that legislative action will ultimately enhance California's AB 1054 regulatory framework. Third, SCE is well positioned from a regulatory standpoint to deliver for customers and investors. With that, I'll turn it over to Maria for her financial report.

Thanks, Pedro, and good afternoon. In my comments today, I will cover second quarter 2025 results, provide additional insight into key regulatory proceedings, and update you on other financial topics. Starting with the second quarter, EIX reported core EPS of $0.97 compared to $1.23 last year. Page 5 provides the year-over-year quarterly variance analysis. As Pedro mentioned, the year-over-year comparison is not particularly meaningful because SCE has not received a final decision in its 2025 GRC. SCE continues to book revenues at 2024 authorized levels adjusted for the change in return on equity and we'll record a true-up when it receives a final decision. SCE's core EPS variance was primarily driven by higher operating and maintenance expenses and the net impact of regulatory decisions received in each period. EIX Parent and Other's variance was primarily driven by higher interest expense. I'd like to expand on Pedro's comments on the wildfire recovery compensation program for the Eaton Fire. As SCE resolved claims, we would not expect to see actual or estimated costs run through the income statement, aside from the small shareholder contribution associated with self-insurance. The cost would be offset by SCE's customer-funded self-insurance for the first $1 billion and then by receivables or regulatory assets associated with the wildfire fund and regulation put in place by AB 1054. An efficient reimbursement process from the Wildfire Fund also means SCE would not have to issue long-term debt to fund payments. On SCE's 2025 general rate case, if adopted, the proposed decision would result in base rate revenue requirements of $9.8 billion in 2025, $10.2 billion in 2026, $10.6 billion in 2027, and $11 billion in 2028. Translating the rate base numbers shown in the proposed decision into total company rate base and holding all else constant, the results would be generally in line with our current range case. Following a final decision, we will incorporate all aspects of the GRC into our long-term plans and refresh our projections. In SCE's opening comments, it will outline areas where it believes revisions are warranted to deliver better outcomes for customers and ensure the decision aligns with the evidentiary record, applicable law, and established regulatory principles. Let me expand on a couple of areas. On wildfire mitigation, the decision would authorize more than 1,800 miles of grid hardening, consistent with SCE's total hardening request. However, it shifts about 400 miles from targeted undergrounding to the covered conductor program. While the proposed decision reflects a significant increase to the historical level of targeted undergrounding, it falls short of SCE's well-supported request. This reduction limits SCE's ability to appropriately mitigate the wildfire risk in the most vulnerable areas. On infrastructure replacement, the proposed decision would approve the majority of the proposed programs but scales back the scope. The decision recognizes the importance of resuming infrastructure replacement after several years of wildfire-focused spending, but we believe the gradual ramp-up does not fully reflect the urgency of today's reliability and electrification needs. As for the next steps, oral argument is scheduled for August 11, and SCE will file its opening comments on August 18 and reply comments are due August 25. The earliest the commission can vote on the proposed decision is at its August 28 voting meeting. During oral argument and in comments, SCE will advocate for adjustments that better align with the state's climate objectives and the safety and resiliency needs of the communities we serve. As we've said before, we understand the commission's desire to balance safety, reliability, and affordability, and we will continue to work collaboratively to ensure the utilities programs deliver value to customers. Continuing on to the regulatory front, SCE has advanced other regulatory proceedings and outcomes, ultimately derisking our financial outlook. I will highlight a few updates. First, the CPUC issued final decisions in SCE's Wildfire Mitigation Cost Effectiveness and Wildfire Mitigation/Vegetation Management proceedings, providing certainty on the timing of cost recovery and contributing to our 2025 earnings guidance. On the Wildfire Mitigation Cost Effectiveness settlement agreement, the CPUC authorized recovery of more than $300 million of operating and maintenance expenses and $700 million of capital for historical wildfire mitigation and restoration. In SCE's 2022 Wildfire Mitigation/Vegetation Management proceeding, the CPUC authorized the recovery of about $290 million of operating and maintenance expenses and $99 million of capital while disallowing about $65 million of operating and maintenance expenses. I'll note that SCE has filed an application for rehearing to address certain legal and factual errors that resulted in incorrect disallowances of costs incurred to make SCE's system and communities safer and more resilient to wildfire threats. Second, as another step toward recovering historical costs, in April, SCE filed its application for authority to issue securitized bonds to finance the recovery of about $1.6 billion related to the TKM proceeding. This securitization allows for the issuance of recovery bonds with the highest possible credit rating, which reduces financing costs for SCE's customers. The Administrative Law Judge recently issued a proposed decision, which would approve the financing order, and the schedule calls for the final decision in August. Third, on the Woolsey cost recovery application, SCE recently filed its rebuttal testimony. The schedule includes a motion for consideration of a settlement agreement or joint statement of stipulations of issues due on August 12. As always, SCE is open to settlement discussions if a fair and reasonable outcome can be achieved, benefiting customers and shareholders. Lastly, the 2026 cost of capital proceeding continues to progress with interveners submitting their testimony yesterday evening. During the quarter, the Administrative Law Judge also issued a scoping memo with a schedule that calls for a proposed decision in November. Turning to Pages 6 and 7. SCE's capital expenditure and rate base forecasts remain unchanged while we await a final GRC decision. The utility continues to make investments in safety, reliability, and resiliency. The rate case request supports investments that are essential to meet customer needs both today and through the end of 2028. This includes critical work in infrastructure replacement and wildfire mitigation, as well as investments to meet the growing demand in our service area. As we have highlighted before, we continue to see substantial additional capital needs beyond the GRC that are incremental to the plan. Moving on to our EPS guidance outlined on Pages 8 and 9, we are confident in reaffirming the 2025 range of $5.94 to $6.34 and our long-term EPS growth expectations of 5% to 7% from 2025 to 2028. As a reminder, we will refresh our financial guidance 6 weeks after SCE receives a final decision in its 2025 GRC. This will include our capital and rate base projections, 2025 core EPS range, long-term core EPS growth, and financing plans. That concludes my remarks, and back to you, Sam.

Denise, can you please open the call for questions? As a reminder, we request you to limit yourself to one question and one follow-up, so everyone in line has the opportunity to ask questions.

I know that AB 1054 is a lot in flux right now, and the legislature is on recess, but just we had news last night about the proposed $18 billion fix. I just wanted to get your view on if half of this is coming from utilities, how would you kind of define what is or what is not an acceptable structure and whether you're open to shareholder debt or equity contributions upfront or through a certain period in order to kind of participate in that solution?

A very fair question. Look, I'll start by saying that we saw the article. There's a lot of work going on between the Governor's office and legislative leaders. As I mentioned, we've been in discussions, but there's still a long way to go through the summer recess and into hopefully seeing legislation in this session. So at the end of the day, we will be looking at the balance of everything that is in the package because the devil is always in the details. So it's really impossible to comment right now on this one element or that one element. I will say, as I think you've heard me say before, that from a policy or principles perspective, we do believe that the investor-owned utility framework makes a lot of sense and that calls for shareholders making capital investments, having the opportunity to earn an authorized rate of return, and having full recovery of all prudently incurred costs. So in that context, AB 1054 itself was a departure from that in having shareholders do an upfront contribution to help seed the fund. And so we've been vocal that moving forward, an expansion of 1054 that was purely being done along investor-owned utility rate-making principles would not have a shareholder contribution. That said, it's a complex environment, and there's a lot going on. And again, we'll need to see the balance of an ultimate package. We don't foresee and frankly don't see a need for having upfront contributions like they were in AB 1054 previously. There is cash in the fund, and you probably saw the comments by the fund administrator, the California Earthquake Authority, that the current capacity of the fund, they estimate to be about $22 billion, even taking into account the amounts that have been called for the Dixie and Kincaid fires. And as we know, unfortunately, the process of going through claims can take quite a long time, so we don't anticipate that there would be a very rapid depletion of the fund. And we don't know how much Eaton would deplete it if Eaton ends up being SCE's fire, but whatever that amount is, it will take multiple years. That suggests that there isn't a need for an upfront piece. Beyond that, though, we'll have to take a look at what's in the package and then make a determination as to whether that package is in the interest of both our customers and, importantly, our shareholders.

Okay. That's very helpful. There's a lot of volatility in the background, too. So I guess just you kind of mentioned that once you have greater visibility into the cause of Eaton or even the damages and liabilities that you would disclose those promptly. Should we be expecting that to be more one-off, as you know, you're going to communicate to the market? Or do we have to kind of wait for earnings calls and 10-Qs to get your best assessment of that liability?

Yes. Nicholas, great question. And I guess the way I would answer that would be our normal process, right, is to try and provide information during the quarterly earnings calls. That is certainly the timeframe when we take a look at potential reserves, etc. You've seen that experience with the 17 and 18 fires. However, if we had a piece of information that we thought was sufficiently material not only for investors but also for the community, I could certainly foresee a case where we might do something off-cycle. So, in a long-winded way of answering it, it depends, right? And we'll make sure that we're doing ultimately the right thing in terms of disclosure and transparency.

Turning to the GRC proposed decision, could you provide finer detail on this versus the range case in your forecast? Should we assume that if the proposed decision stands, that range case would essentially become your outlook? Or are there opportunities to bring capital back in beyond what you already flagged as upside potential on the right-hand side of that slide?

Rich, thanks for the question. So we are going to file comments on the proposed decision. Just as a reminder from the comments that Pedro and I have already made, because we do think there are some areas there that warrant some revision. We have given you a range case before. The proposed decision is aligned with our range case outcome. But as you know, from other information that we share, there are other opportunities above and beyond what we've already included in our forecast. So as we work through and get the results of the final decision, we'll be working through all of those other elements as well, and I'll be sharing those with you after the final decision is issued.

Okay. Understood. Just to be clear on that, the 6-week post-final decision update could also offer a view on those other opportunities?

Yes.

Got it. Super helpful. And then turning to Woolsey, just following rebuttal here, how are you feeling about the ability to reach a settlement in that over the next few weeks?

We are always willing to engage in settlement discussions as long as they are fair and reasonable. We have submitted our rebuttal testimony and believe we presented a strong case. The feedback from the interveners in their testimony focused on our various programs and our execution of them. We believe we have shown, both in our original and rebuttal testimonies, that we have acted responsibly as an operator.

Wanted to just ask on some of the affordability legislation that's been proposed in California, specifically on the provisions around securitization. Just can I get your thoughts on perhaps other alternatives that you think could still support affordability in a more constructive way? And then if you've done any work to kind of quantify the potential impacts if the securitization provisions were passed as written, I would be curious if there's anything to share there as well.

Yes. Let me start on this one, and Maria may have additional comments. I alluded to a high level in my remarks to some of the other alternatives out there to try and work on affordability for our customers. First and foremost, Carly, it really starts with the utility being an excellent operator. That's why I spent time on my comments to make sure that investors understand the hard work that this company has taken on over multiple years to continue to look at opportunities to increase operating and maintenance efficiency as well as capital efficiency. We talk about making sure that we are capturing customer value across all areas of operation. That's work that continues, and we're excited about the opportunities to use technology and continued process improvement to address that. And that's frankly something that I know our Sacramento team and I personally have spent time making sure we share with policymakers so that they understand that starting point. Secondly, there are a number of areas like public purpose programs. You've heard not just us, but you've heard other thought leaders across the industry, including academics, talk about how there are programs like the subsidies that support low-income customers that today are carried on the electric bill. From a policy perspective, though, it would make more sense to be funded by the taxpayer. And so that's another kind of broad category. Yet another one is net energy metering. And we're looking at provisions around that, and you've seen some build activity in Sacramento trying to address that. Finally, and maybe this leads to the back part of your question, it's important that policymakers and legislators understand how the numbers end up working, particularly when you look at something like securitization. As I mentioned in my remarks a few minutes ago, I'll say it a little differently. There is no free money here, no free lunch. And from a customer perspective, I appreciate, and in fact, I've had very candid discussions with legislators around this. I appreciate they're looking to address affordability by reducing the amount of the bill that's going towards shareholder earnings. What we're conveying is that in doing that, you're altering the overall balance of the regulatory framework. Rating agencies will observe that, and they're going to see that it is a utility with diminished credit quality. That translates into cost of debt, and higher cost of debt gets passed through to the customer. We try to come with some estimates. They're not quite ready for prime time, but we are confident that if you see a dollar of foregone earnings that you might think saves a dollar for the customer, that will actually lead to more than a dollar of added customer cost over the long run. We've been very clear about that. A final point is that you often hear in Sacramento a concern about utility profits in general. When we post the business update tomorrow or the next couple of days, you'll see a chart from new analysis that our team has done. It compares SCE's average bill for an average residential customer to an average municipal power bill in our territory. We hold a lot of respect for our peers in public power. It's not about better or worse, but rather what the differences are. Just speaking qualitatively, you'll see numbers when the chart posts in the business update. Yes, SCE's average bill, or the bill for the average residential customer is higher than that for public power. The reason it's higher is primarily around elements that are not in municipal power bills, such as taxes that they don’t pay. Ultimately, somebody in society has to pay for public purpose programs, subsidies we are required to carry on our bill that they are not. Wildfire mitigation expenses are something any utility, whether public or investor-owned, will have to contend with long-term. When you then look at the pieces that are truly comparable—most of the bill composed of operational costs for transmission and distribution, generation, and purchase power, with financing costs fully included—utility profits are part of that analysis. You'll see that when we compare to our colleagues at the Los Angeles Department of Water and Power, the SCE bill—that portion of the bill is actually a few dollars cheaper every month than it is for L.A. This is despite the fact that we have a system that should be more costly to run, given we serve about 3,100 customers per square mile, whereas L.A. DWP serves around 105 customers per square mile. Again, this is with utility profits factored into the analysis. I think it shows that the investor-owned utility model indeed stimulates innovation and efficiency by providing a capital market signal to our team. I know there was a lot to unpack, but that's another way in which we're trying to quantify—what really matters in the end is the impact on total bills. Maria, I know you said a lot there, but is there anything else you would add or correct?

Yes. I think, Carly, you had one other question. I think in terms of how do you think about the math, obviously, the utility is all about rate-based math. So you can look at it from that perspective. We continue to see a tremendous amount of customer need and opportunity to support that need, which is supportive also of our long-term growth trajectory. So I think those were the two parts of your question.

We are currently awaiting several regulatory decisions for you and your peers in California. Specifically, I'm concerned about the cost of capital filing, considering the difficult situation for electric utilities in your state. It appears there is insufficient support for a higher return on equity to acknowledge the risks involved. The solutions being discussed in the legislature seem temporary and more like quick fixes. When looking at the broader picture, one might question the incentive for investors to support California utilities, given the challenges mentioned and the lack of proper compensation for the higher risks being taken on. I'm being frank here.

I appreciate it, Angie. Listen, I'll give you a short answer to this one. California has ultimately generally gotten it right. Right now, we're seeing proposals in segment, but we haven't seen a final bill. We have seen, I think, supportive action of the PUC at the moment after you go through a lot of process. It's not a guarantee that they'll get it right again in this decision or that decision, but overall, we have a state that is committed to serving customers, committed to the load growth that's coming across the state from electrification and data centers, and it's committed to the clean energy transition for which they need our infrastructure. So I would maybe qualify your thesis, Angie, by saying yes, it feels bumpy right now, but it's felt bumpy before, and ultimately, we've seen policymakers do the right thing.

One thing, Angie, you said fixes have been temporary. I think maybe just to follow up on something that Pedro said in his prepared remarks. When you think about the things that are challenging California right now, affordability, yes, but also enhancing wildfire protections, etc., there are things that are, as Pedro mentioned, will happen this year—that really go to the foundation of stabilizing the IOU framework. From that stable, more stable foundation can move on and really address what is a societal issue. There will be more work to come in the future around homeowners insurance, building codes and standards, and hopefully, liability reform. There are a lot of different pieces of this. And by the way, right now, AB 1054 is an IOU solution. What about all the municipal utilities in the state? So there are a lot of players, and this is a much bigger analysis that will need to be done. What we're focused on now and why we're referring so often to AB 1054 is because we need that as a foundation to continue the good work with the rest of the stakeholders.

Maria, I'm glad you raised it, and I would just add one accent to that. We know the state understands that the underlying wildfire risk—again, broadly for the state, not just utility ignitions, but wildfire risk is only going to increase with climate change. I remind you of the adapting for tomorrow white paper that we put out, along with SCE's climate adaptation and vulnerability assessment about four years ago or so. I think it stated that by 2050, California is going to be seeing it could be as much as three feet of average sea level rise and seven times more of the kind of hot days that today are in the top one percent—more floods and more droughts. Importantly, the risk of 20% more wildfire ignitions across all causes. It's imperative for this state to be able to prepare for that risk that we know is coming, and it's going to be made worse by climate change. The good news here is that, I'll tell you, my discussions with the governor show he understands that. In discussions with legislative leaders, they understand that. We have one article; we have one framework, and there's a lot more work to be done before there's a bill that gets voted on and signed. But I think it's really important that folks have that underpinning of where the risk is headed, what can be done this year—a kind of narrower extension or strengthening of the 1054 piece—but importantly, work hopefully next year on this much broader economy-wide issue.

Great. And then one follow-up. And again, as you just said, there's so many different, I don't want to say proposals, but different aspects of what they're going to come out with. But it seems like, in all the discussions that everyone is having, maybe the core of all the discussions or what the legislature is working on is AB 1054. And AB 1054 had some really good aspects to it, but also it's a shared risk model between ratepayers and investors. I'm curious if—and maybe it's in line with Andrew's question—I'm curious if we're still going to use AB 1054 going forward as an anchor for the solution that's going to be required, and what concern that it continues to be a shared risk model between customers and investors.

Yes, sure. And maybe a quick perspective. First, there are elements of AB 1054 that continue to endure and are frankly, really important. You've always heard me say that perhaps the most important part of AB 1054 is the strengthening of the prudency provisions. I'm glad that that survives, along with the existence of the fund. That's really critical. I think your question was if they look at what the framework is for an extension. Is that following the template of 1054? That appears to be the overall direction; it is risk sharing. You heard my comments earlier in response to Angie's question about how, in an ideal world, and frankly, in the investment utility model, shareholder contribution to that risk should really come in when there’s been a prudency issue—a penalty, right. If we are managing wildfire risk and we've been prudent, and the worst happens, but it is exacerbated by all sorts of other conditions, and it’s not because of a lack of prudency, that’s a prudently incurred cost that should be borne by customers. It was a departure from that to get to the risk sharing in 1054. What we read along with you in the article last night, and we've certainly heard behind the scenes, is that the legislators are looking at continuing some sort of risk sharing. Our decision ultimately on whether that's something that we should accept or endorse will depend really on all the levels in the details and the full package that gets presented to us. That addresses your question.

Yes, maybe just one more thing, Anthony. I think it goes back to what we were talking about earlier. AB 1054, shoring up the wildfire fund, restoring people's confidence in it—that's a step, and I think that's a step that's very important as the foundation. And certainly, it is one we're focused on for this legislative cycle. The state of California has a wildfire issue writ large beyond anything associated with industrial and utility equipment. I think as we move forward in time, we will be advocating for and supporting other approaches—other things that the state can look at. We'd be very supportive of any sort of analysis that would be ongoing because there are a lot of factors. We have to address building codes and standards, enforcement of those, the homeowners insurance market, liability reform—there are a lot of different pieces to this. And by the way, right now, AB 1054 is an IOU solution. What about all the municipal utilities in the state? There are a lot of players, and this is a much bigger analysis that will need to be done. What we're focused on now and why we're referring so often to AB 1054 is because we need that as a foundation so we can continue the good work with the rest of the stakeholders. Just to reiterate, I think Pedro mentioned this earlier, Anthony, sort of the status of the fund is—the fund administrator just had a Board meeting last week or the week before and indicated that, based on their analysis, they have $22 billion of claims-paying capacity available in the fund. And that's after accounting for other fires that are already accessing the fund, if you will. So I think that's a pretty robust number. That would come after $1 billion of our own customer-funded self-insurance to utilize to pay claims. It's a very robust point at which we are at this moment in time. We don't know, at this point, the cause of Eaton—investigation is still ongoing. What we have said is that there is a probable loss, but that’s a very robust number based on the analysis that the fund administrator has done themselves.

Regarding the Eaton investigation, can you remind us of kind of where that stands and who's involved in running that and when you expect an outcome? And then where do you stand on the idea of issuing equity to fund contributions to the $18 billion wildfire replenishment?

Okay. I'll take the first one, and Maria can take the second one. On the Eaton investigation, I think I shared this in my comments already, but let me just recap here. Really think about it as two separate investigations. There's the official investigation that has the involvement of LA County Fire being led by them and the work with CAL FIRE and others. So that's a separate track. We provide support to that when they ask us for details. But that is an independent investigation. Separately, you have Edison's own investigation, which we are doing in close engagement with a number of stakeholders, including attorneys for plaintiffs as well as communities and local governments. The reason for that engagement is that there must be clarity about how we're proceeding, and all the questions get addressed upfront in terms of how should we touch this piece of equipment or how should we remove that bracket from that tower or what have you. That does mean that it adds time because every time you’re going to do a piece of work, there's collaboration involved in developing protocols that everybody will agree on. That's why that is taking a while. We have shared in terms of timing, Gregg, that while we can't predict or forecast what the ultimate timing will be for either of the investigations—typically in these complex fire cases, we have seen the official investigation take 12 to 18 months from the start of the fire. And then again, we don't have an estimate on how long ours will take, particularly since this is a collaborative process that just adds time to every step.

So, Gregg, I'll address your second question. First, again, we want to, as Pedro said before, understand the entire package that is potentially in any piece of legislation that comes along. From that perspective, something that had a large firm payment would actually drive our cost of capital higher and would ultimately not benefit customers. We are very aware and sensitive to where our share price is changing and what that valuation discount is. So that's one piece of it that's top of mind for us. The second piece of it is just from an efficiency perspective, the fund doesn't need to be shored up with cash today. Pedro already discussed that previously. If you think about the process—it won't happen immediately to get to a place where you're actually accessing the fund if an event happens—then you have people making claims, you have to go through your claims process. As we know from our own experience with prior events, that takes a long time. At this point in time, we also don't see a need, and it would be inefficient for the fund itself to have cash upfront. So those two pieces—how it affects our overall capital structure and our cost of capital and the ramifications for customers—indicate that we don’t believe that upfront funding is necessary right now.

To follow up a little bit on the prepared remarks comments, you stated that the proposed decision is about the rate case specifically, and that the proposed decision aligns with the range-based rate base forecast. Is it also fair to say it aligns with the EPS growth rate considering the proposed attrition increases in the later years?

Yes. It does align with the range case forecast, and rate base is the driver for earnings. We will have to, as we get through this final decision, run through all of that and give you more granularity around places where we might see additional capital opportunities, etc., to really inform the detailed analysis that we'll be providing. But it is aligned with the range case forecast.

Okay. Understood. As we think about the roll forward that you referenced six weeks afterwards, should we think about the base for that as the 2025 ex the TKM? Should we think about a different year? Just any color you can provide on the leap-off point would be helpful.

Yes. We will be replicating what we have there today, which is our '25 through '28 analysis.

I guess that's better than the package delivery for, but they do have nice brown uniforms. Just, I guess, if I could ask a question, maybe it's in the same vein as Angie and Nick's question earlier. I understand it's just – we're just all going by a Bloomberg story last night. There's not—there's not a framework on the legislation. But it seems like in all the discussions that everyone is having, maybe the core of all the discussions or what the legislature is working on is AB 1054. And AB 1054 had some really good aspects to it, but also it's a shared risk model between ratepayers and investors. I'm curious if—and maybe it's in line with Andrew's question—I’m curious if we’re still going to use AB 1054 going forward as an anchor for the solution that’s going to be required, and what concern that it continues to be a shared risk model between customers and investors.

Yes, sure. And maybe a quick perspective. First, there are elements of AB 1054 that continue to endure and frankly are really important. You've always heard me say that perhaps the most important part of AB 1054 is strengthening of the prudency provisions, right? I'm glad that, that survives the existence of the fund. So that's really critical. I think your question was if they look at what the framework is for an extension, is that following the template of 1054? That appears to be the overall direction; it is risk sharing. You heard my comments earlier in response to Angie's question about how in an ideal world and frankly, in the investment utility model, shareholder contribution to that risk really should be coming in when there’s been a prudency issue, right? A penalty, right? Because otherwise, if we're managing wildfire risk and we've been prudent and the worst happens, but it's exacerbated by all sorts of other conditions, and it's not because of a lack of prudency, that's a prudently incurred cost that should be borne by customers. There was a departure from that to get to the risk sharing in 1054. What we read along with you in the article last night, and we have certainly heard behind the scenes, is that the legislators were looking at continuing some sort of risk sharing. Our decision ultimately on whether that's something that we should accept or endorse will really depend on all the levels of detail and the full package that gets presented to us. That gets to your question.

Yes, maybe just one more thing, Anthony. I think it goes back to what we were talking about earlier. AB 1054, shoring up the wildfire fund, restoring people's confidence in it—that's a step, and I think that's a step that's very important. It is one we're focused on for this legislative cycle. The state of California has a wildfire issue writ large beyond anything associated with industrial and utility equipment. I think as we move forward in time, we will be advocating for and supporting other approaches—other things that the state can look at. We'd be very supportive of any sort of analysis that would be ongoing. It is a lot of factors. We have to address building codes and standards and enforcement of those, the homeowners insurance market, and liability reform—there are a lot of different pieces to this. And by the way, right now, AB 1054 is an IOU solution. What about all the municipal utilities in the state? So there are a lot of players, and this is a much bigger analysis that will need to be done. What we're focused on now and referring so often to AB 1054 is we need that as a foundation so we can continue the good work with the rest of the stakeholders.

Maria, I'm glad you raised it, and I would just add one accent to that. We know that the state knows that the underlying wildfire risk, again, broadly for the state, not just utility ignitions, but wildfire risk is only going to increase with climate change. I remind you that the adapting for tomorrow white paper that we put out, along with SCE's climate adaptation and vulnerability assessment about four years ago, I think stated that California will be experiencing, by 2050, as much as three feet of average sea level rise, seven times more hot days that today are in the top percent, and more floods and more droughts. Importantly, the risk of 20% more wildfire ignitions across all causes. So it's imperative that this state be able to prepare for that risk that we know is coming, and it's going to be made worse by climate change. The good news here is that my discussions with the governor indicate that he understands that. From discussions with legislative leaders, they understand that. We have one article; we have one framework, and there's a lot more work to be done before there is a bill that gets voted on and signed. But it is important that folks have that underpinning of where the risk is headed, what can be done this year—a kind of narrower extension or strengthening of the 1054 piece—but importantly, work hopefully next year on this much broader economy-wide issue.

Well, thank you for joining us. This concludes the conference call. Have a good rest of the day. You may now disconnect.